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return, or is a non-resident alien, the fiduciary is required to make the personal return for him, as indicated in the following paragraphs.

FOR MINOR OR INSANE PERSON. Where the fiduciary acts for a single beneficiary who is a minor or an insane person, he is not required to file a fiduciary return for the trust estate but will make a personal return for his ward on the form prescribed for individuals. If, however, a fiduciary has more than one ward by reason of the same estate or trust, he makes the fiduciary return, and also a separate return for each ward having a net income of $1,000, if unmarried, or $2,000, if married.49 In all cases where fiduciaries act for minors or incompetents they are held for the purpose of the income tax to be acting as the agents of such minors or incompetents and must pay all tax, normal and additional, chargeable on such income in their hands, as though the persons for whom they act were acting for themselves.50 In the year in which a minor becomes of age, the guardian should make a fiduciary return for the period between the beginning of the year and the day on which the beneficiary becomes of legal age. At the close of the year the beneficiary makes his own return including therein the amount of income received from the fiduciary during the year.

FOR NON-RESIDENT ALIEN BENEFICIARIES. When there is only one beneficiary, who is a non-resident alien, the fiduciary files only one return, that is, the personal annual return for and on behalf of th

49 T. D. 2090. 50 T. D. 2231.

resident alien, 51 signing the same as agent, reporting therein as income of the non-resident beneficiary the amount received by the estate or trust. If there are two or more beneficiaries, or if a part of the income accruing to the trust or estate is not distributed, the fiduciary is required to make a return as fiduciary and a separate personal return for each non-resident alien beneficiary.52 The fiduciary must account for the normal and additional tax of non-resident alien beneficiaries in the same manner as any other agent for a non-resident alien is required to do.53

Income to Be Reported by Beneficiary. As stated in the foregoing part of this chapter unless the beneficiary is under some disability which requires a fiduciary to act, the beneficiary makes his own personal return and accounts for the tax upon his entire net income, including that which has been received from the estate.54 The fiduciary is not under any duty to account for or pay the tax on amounts distributed to beneficiaries where the beneficiary is capable of making his own return and is not a non-resident alien. The beneficiary reports the income for the year in which it is received by him or credited to him. The amount to be reported by the beneficiary, as his income from the trust estate, is the amount actually received from the fiduciary or actually credited to him, as his income, by the fiduciary, that is, the actual amount of income to which he obtains legal title during the year.55

51 Form 1040 is the form to be used for this purpose. 52 T. D. 2313. 53 See Chapter 6. 54 T. D. 2090. 55 Act of September 8, 1910, $ 2 (b).

Withholding at the Source Against Fiduciaries. The provisions with respect to withholding the tax at the source apply in the case of payments to fiduciaries in the same manner' as in the case of payments to individuals. There is, generally speaking, no withholding at the source on payments to citizens and residents of this country and, it follows, there is no withholding at the source in the case of a fiduciary who is a citizen or a resident, or has an office or place of business in this country. The one exception to this rule is the withholding of one 2% normal tax on interest paid on obligations of corporations containing a tax-exempt covenant. In such cases the tax is in theory withheld, but not in actual fact, since the paying corporation assumes the burden of the tax, paying the interest in full to its bondholder. Although the fiduciary may be a corporation, in its capacity as fiduciary, it is subject to the provisions of law applicable to individuals and not to corporations, hence on payments of such interest as that referred to in the preceding sentence, the paying corporation will be required to treat the corporation fiduciary as an individual and assume the burden of the 2% tax.56

Withholding at the Source by Fiduciaries. A fiduciary is under the same duty to withhold the tax at the source as is an individual, partnership or corporation, that is, the tax is withheld at the source upon all annual or periodical payments of fixed and determinable income to non-resident aliens in the manner required by the law.57 No withholding by a fiduciary is required in the case of payments to citizens or residents of this country or to corporations or partnerships.

56 See Chapter 41 ori collection at the source.

Information at the Source. The fiduciary is subject to all the provisions of the law requiring information at the source. These requirements are discussed in full in a subsequent chapter 58

58 See Chapter 40 on information at the source.

F.I. Tax.—7



The law provides that guardians, trustees, executors, administrators, receivers, conservators, and all persons, corporations, or associations, acting in any fiduciary capacity, shall make and render a return of the income of the person, trust, or estate for whom or which they act, and be subject to all the provisions of this title which apply to individuals." 1 The law implies that foreign fiduciaries shall be subject to its provisions to the same extent as non-resident alien individuals. The term “foreign fiduciaries” is defined, for the purpose of this book, as fiduciaries who neither reside in this country nor have an office or place of business here, that is, those who are not within the jurisdiction of this Government. The preceding chapter contains the general rules relating to fiduciaries. This chapter treats of the application of those rules to foreign fiduciaries. As to who are fiduciaries and who are beneficiaries within the meaning of the law, and as to the special duties of executors, administrators and receivers see the preceding chapter.

Trust Estates. The trust estate under the control of a foreign fiduciary is subject to tax on net income derived from sources within this country. Net income from

1 Act of September 8, 1916, $8 (c), as amended by Act of October 3, 1917.

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